The Basics
- The OBBBA establishes Trump Accounts, which include a $1,000 federal seed contribution for newborns and a $6.25 billion gift from the Dell Foundation that provides $250 seed deposits for millions of eligible children.
- The legislation allows up to $5,000 in total annual contributions per child, which may include up to $2,500 from an employer on a tax‑free basis.
- Launching July 5, 2026, these tax-deferred accounts allow penalty free withdrawals beginning at age 18 for major milestones such as purchasing a first home or pursuing higher education.
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Leveraging Trump Accounts: A Primer for Parents and Employers
As the One Big Beautiful Bill (OBBB) continues to reshape the American tax landscape, one of its most talked-about innovations is the introduction of Trump Accounts. Designed to jumpstart financial security for the next generation, these tax-advantaged accounts offer a unique way for families and employers to build long-term wealth for children.
Whether you’re a parent looking to secure your child’s future or an employer looking to enhance your benefits package, understanding the mechanics of these new accounts is essential for your 2026 tax planning.
What is a Trump Account?
A Trump Account is a custodial-style savings vehicle designed specifically for U.S. citizens under the age of 18. While these accounts share some characteristics with traditional IRAs, they are uniquely structured to allow for multiple funding streams — including a first-of-its-kind government “seed” contribution, the initial deposit the government will provide to jumpstart the account. This foundational amount is intended to encourage account holders and their families to build additional savings over time.
The primary goal is to leverage the power of compound growth from a very early age, providing a financial foundation that can eventually be used for home purchases, education, or retirement.
Who Is Eligible for a Trump Account?
Any U.S. citizen under age 18 can have a Trump Account opened on their behalf. However, specific eligibility criteria apply to receive the government or philanthropic seed contribution. Eligible children receive one or the other; not both. Children who don’t qualify for either seed contribution can still open Trump Accounts and benefit from tax-deferred growth on family and employer contributions.
Eligibility for the Federal $1,000 Seed Contribution:
- Available to children born between Jan. 1, 2025, and Dec. 31, 2028
- One-time contribution deposited at account opening
Eligibility for the Dell Foundation $250 Contribution:
- Available to 25 million children age 10 and under
- Must live in ZIP codes with median household incomes below $150,000
- Cannot be combined with the federal $1,000 seed (children receive one or the other; not both)
Trump Accounts: Key Features and Benefits
The Trump Account structure offers several advantages that distinguish it from existing tools like 529 plans or standard custodial accounts. The key differentiators include:
1. Government and Philanthropic Seeding:
The one-time $1,000 contribution from the U.S. Treasury for eligible newborns and the $250 contribution from the Dell Foundation for 25 million children in qualifying ZIP codes provide a foundational investment for those who qualify.
2. No Earned Income Requirement:
Unlike a Roth IRA, a child does not need to have a job to receive contributions.
3. Flexible Funding Sources:
Contributions can come from parents, grandparents, friends, and even employers.
4. Tax-Deferred Growth:
Investments within the account grow tax-deferred, meaning no taxes are due on capital gains or dividends until funds are withdrawn.
How much can parents and employers contribute to a Trump Account?
To maintain the tax-advantaged status of a Trump Account, several rules apply during the growth period (from birth until age 18):
- Annual Limit: Total annual contributions from all individual sources are capped at $5,000 per child (indexed for inflation after 2027).
- Employer Limit: Employers can contribute up to $2,500 per year to an employee’s child’s Trump Account. These contributions are excluded from the employee’s gross income, creating a valuable fringe benefit, and count toward the overall annual account contribution limit.
- Investment Restrictions: Funds must be invested in low-cost index funds or ETFs that track U.S. equity markets (with fees capped at 0.10%), ensuring broad-market exposure.
When can funds be withdrawn from a Trump Account?
No distributions are allowed during the growth period (birth to age 18), except in cases of death or disability. This restriction ensures the funds, which are intended for the account holder’s retirement, reach their long-term potential.
At age 18, the account becomes subject to standard Traditional IRA rules. Original after‑tax contributions can be withdrawn tax‑free; investment earnings and government/philanthropic contributions are taxed as ordinary income when withdrawn.
Funds can be used earlier for “American Dream” milestones, such as higher education or a first-home purchase, without the standard 10% early-withdrawal penalty.
How to Open a Trump Account
The process for opening these accounts begins with a tax election:
- Form 4547: Parents or guardians must file IRS Form 4547 to establish the account and claim the $1,000 seed (if eligible). Parents or guardians may file IRS Form 4547 either
- with their 2025 tax return, or
- electronically at TrumpAccounts.gov
- Timeline: While elections are happening now, accounts will officially be funded and accept private contributions starting July 5, 2026.
Your Takeaway
Trump Accounts represent a significant shift in generational wealth-building. By combining government and philanthropic seeding with tax-deferred growth, they offer a robust vehicle for every American child to participate in the growth of the U.S. economy.
Rehmann’s Private Client Advisory and Tax teams are currently helping families and business owners model how these accounts fit into their broader strategies. To determine the best way to leverage this new tool for your family or your workforce, click here to speak with an advisor.
Frequently Asked Questions
Q: Can a child have both a 529 plan and a Trump Account? A: Yes. Trump Accounts complement existing tools. While 529s are focused on education, Trump Accounts provide a broader financial foundation that can follow the child into adulthood and retirement.
Q: What happens to the Dell contribution if we live in a high-income area? A: The Dell seed is targeted specifically at ZIP codes with a median income below $150,000. However, the child is still eligible for the account itself and any family/employer contributions, even if they don’t qualify for the Dell or Treasury seed.
Q: Are contributions tax-deductible? A: Individual contributions are made with after-tax dollars (not deductible). However, employer contributions are deductible for the business and tax-free for the employee.